Reliant agrees to settle California allegations

LAURA GOLDBERG, Copyright 2003 Houston Chronicle

Published
5:30 am CDT, Thursday, October 2, 2003

Reliant Resources agreed to a settlement that could total $50 million to resolve matters relating to the 2000-2001 California energy crisis, the Federal Energy Regulatory Commission said this afternoon.

The settlement agreement, which the commission said is its largest ever, addresses allegations regarding "potentially manipulative bidding practices" in California's electricity markets as well as an allegation relating to attempted price manipulation.

"Today's settlement should serve as a warning to all energy companies that attempts to manipulate energy markets will have consequences," FERC Chairman Pat Wood III said in a written statement.

Reliant didn't admit to any violations as part of the settlement.

The agreement calls for Reliant to pay $15 million in cash within 30 days.

Two more installments of $5 million each are due by Sept. 30, 2005 and 2006.

As much as another $25 million could come from Reliant's selling of 824 megawatts of generation capacity in California over the next three years. Settlement proceeds from the three annual auctions will depend on market conditions, but won't be more than $25 million.

The state's investor-owned and municipal utilities will have the first crack at buying what the FERC called low-cost power.

"Reliant must assume responsibility for its actions,'' said Joel Staff, Reliant's chairman and chief executive officer, in a written statement. The company, he noted, has implemented comprehensive reforms.

This deal doesn't resolve liabilities Reliant may have related to a separate case before the commission involving California's demand for refunds.

But it does resolve a series of other matters pending before FERC.

Houston-based Reliant, which owns deregulated power plants nationwide and provides electricity to consumers in Houston and elsewhere in Texas, previously agreed to two settlements related to the energy crisis.

· In late August, it agreed to pay $836,000 to settle allegations that it engaged in a manipulative trading practice. This deal was cut with FERC staff and still needs approval from the Commission itself.

· In late January, it agreed to pay $13.8 million to settle allegations that it intentionally shut down power plants for two days to drive up power prices.

Various California parties, including the state's attorney general and public utilities commission, filed comments with the commission Tuesday objecting to the August agreement.

"The Reliant settlement is incomplete, overbroad, insufficient and falls far short of accounting for the full panorama of Reliant's manipulative conduct," that filing says.

Staff, who took over as Reliant's interim CEO in April and was named to the post permanently in August, has cited resolving the company's California and commission related issues as a priority.